Morgan Stanley released a research report after participating in the 2026 OCP Global Summit, noting that AI data center expansion remains constrained by power, network, and infrastructure efficiency, but hyperscale cloud providers’ computing power demand remains strong, with robust demand for power, chips, network, and optical communication equipment. The conference confirmed that AI network infrastructure is shifting from the pure pursuit of high bandwidth to balancing computing power utilization, stability, and operational efficiency. The firm is bullish on the opportunities for Arista Networks (ANET), Cisco (CSCO), Lumentum (LITE), Coherent (COHR), and Keysight Technologies (KEYS) in the AI infrastructure upgrade.
Morgan Stanley believes that the penetration of optical communication into scale-up networks has become a long-term trend, and near-package optics (NPO) and co-packaged optics (CPO) will be important technology routes driving this change.
The Morgan Stanley team participated in the 2026 Open Compute Project Global Summit held in San Jose, USA, from October 12 to 15. The conference attracted approximately 15,000 attendees, with another 3,000 unable to enter due to venue capacity limitations, reflecting the industry chain’s high attention to next-generation computing and network technologies. However, the conference offered limited new industry information, as core challenges such as power supply, network architecture, and optical communication routes had already been extensively discussed at multiple previous conferences. The conference confirmed that cloud providers are still continuously expanding computing power, with robust demand for power, various chips, network, and optical communication equipment.
Optical communication upgrades were also a key focus of the conference. The expansion of AI clusters has caused traditional electrical connections to encounter bottlenecks in transmission distance, power consumption, and bandwidth density, elevating the importance of optical interconnects within AI systems. Morgan Stanley is bullish on Lumentum and Coherent, but the expansion of the optical communication market will not bring equal growth to all suppliers; laser configuration, device quantity, and customer selection will determine the degree of benefit. Although the relevant stocks have recently come under pressure, the firm believes that the commercialization of NPO is expected to become a catalyst for both companies, but the conference did not change its original investment judgment.
Meta disclosed CPO testing results, with its laboratory system showing approximately 6 times improvement in interruption compared to traditional optical modules, and 1.35 million hours of operational testing without any irreparable failures, validating the potential for large-scale CPO deployment. However, this conclusion cannot be directly generalized to the entire industry, and each manufacturer’s products still require separate reliability verification. Traditional pluggable optical modules will not exit quickly; NVIDIA mentioned that USFP products are expected to enter mass production in 2027, with Cisco as the co-development partner. Supply of 200G EML lasers is relatively tight, and supply chain pressure for 400G EML may intensify in the future. Lumentum’s ELSFP modules have already entered production, and the placement of lasers remains a point of industry debate. Investors need to pay attention to the value of optical devices corresponding to different architectures and cannot assume that CPO growth will benefit all laser manufacturers.
Morgan Stanley stated that the industry is advancing open network standards and interoperable hardware, with customers favoring streamlined equipment and reduced power consumption, and market expansion does not equate to synchronous revenue growth for suppliers. Whether manufacturers can secure customer orders, maintain product value share, and continuously optimize energy efficiency and stability will determine long-term competitiveness.
